Two years ago, a barely recovering U.S. economy almost stopped growing entirely, due in large part to an economic crisis engulfing Europe. At the center of this crisis was the fear that a debt-ridden Greece, unable to borrow in the world financial markets, would abandon the euro and put the entire single-currency regime at risk. The crisis was averted, or at least postponed, after strong actions last year by the European Central Bank and a bailout package in which Greece agreed to another round of reforms and budget cuts. But those cuts have, predictably, only worsened the Greek economy. The country is entering its sixth year of recession. Its economic output has shrunk by more than 20 percent. Unemployment is at nearly 27 percent, the worst in the European Union. These conditions have given rise to some truly scary political developments in the country, from anarchist violence on the left to the rise of the openly fascist Golden Dawn party on the right.
If economic conditions don’t improve, most observers believe that the current Greek government, led by Prime Minister Antonis Samaras of the center-right New Democracy party in coalition with the socialist PASOK party, will fall. New elections will likely bring to power the major opposition party, the Coalition of the Radical Left, or SYRIZA, led by Alexis Tsipras, a young and charismatic ex-communist. Tsipras has vowed, if elected, to renegotiate the terms of the bailout deal. Such a move could either lessen Greece’s monstrous debt burden and pave the way for growth or plunge the country, the continent, and perhaps the world economy back into crisis.
Tsipras was in Washington recently and sat down for an interview with Washington Monthly editor in chief Paul Glastris. Here is an edited version of that interview.
WM: What is your purpose in coming to the United States?
AT: We want to show that we have no horns on our head and are not out to destroy Europe. I represent the new generation of politicians that wishes to fight for social cohesion and to put Greece back on its feet.
WM: What can you say to the American people about how your policies might affect U.S. growth?
AT: What I want to explain to U.S. citizens is that Greece and citizens of Greece have become in the last few years a kind of guinea pig on which violent and ineffective political choices were used. These policies have borne no fruit and after a certain point they have wrecked Greece and are now threatening to destabilize Europe and pose a danger to the global economy. There is a common interest to both sides to put an end to this madness. Otherwise a recession will be unavoidable in the U.S. in spite of very good handling of the situation financially here on this side.
WM: Would a renegotiation of the agreement between Greece and its creditors lead in the short term to more economic turmoil and lower global growth, lower growth in the U.S.?
AT: I think it’s quite the contrary. If we continue in the current path we would have this turmoil.
WM: What part of the reforms that have been requested of Greece and that Greece has already signed on to do you agree with and think would be helpful? Don’t you think some reforms are necessary to bring investment and jobs back to the country?
AT: First of all, I think that the number one threat to investors is the stability of the Greek economy, in particular whether it will stay in the euro. Why would someone invest in Greece if they don’t know what the currency is going to be there the next day? This uncertainty hasn’t been created by us, but by those who have wanted to impose austerity on us. I do agree that Greece does need structural reforms and it needs them soon. But it is not easy to implement such reforms if you don’t have a stable environment and if you don’t stop ruining the economy.
WM: Can you give me one or two examples of reforms you favor?
AT: One example is impediments to investment. It is not easy to invest when there is not a stable, just tax system, when there is too much bureaucracy, and when there is a tight connection between the political establishment and the group of businessmen who basically control the economy, the oligarchy. All the business seems to go to them somehow since it is a closed group. Also, corruption in the fact that you need to give money under the table. These are all things that need to change and that cannot be changed by those who created all these things.
WM: For our American readers who don’t know the specifics of the Greek system, can you explain how the oligarchy works?
AT: In Greece we are governed by what I tend to call the triangle of sin. One side of the triangle is a bankrupt political system. The second side is the banks. On the third side, you have the mass media. The media companies keep showing negative numbers in their balance sheets while they spend enormous, humongous amounts of money. The political system provides banks with billions of euros, but the bankers are not the ones who pay. It is the taxpayers who pay at the end. Basically, a banker gives loans to the mass media channel of their choice to keep them afloat, and then these mass media channels, whatever they may be, reciprocate by supporting a political system that is floundering.
In the U.S., in order for Congress to avoid the fiscal cliff, there was an agreement that the rich should pay more. In Greece, where we are already over this cliff, if you will, the rich don’t pay taxes. And there is a lot of talk about the data provided by the so-called “Lagarde list” of Greeks who have taken money out of Greece and deposited it in the foreign banks but have never been taxed on this money. The names on the list include Greek bankers, Greek mass media owners, and associates of politicians. These are the same people who impose taxes on the middle class, but they themselves keep their money. I think that Lagarde list is a scandal. It is an excellent X-ray of how the media oligarchy, political oligarchy, and business oligarchy all interact together. [Editor’s note: In 2010 France’s then finance minister, Christine Lagarde, gave Greece’s then finance minister, George Papaconstantinou, a CD containing the names of around 2,000 wealthy Greeks with Swiss bank accounts. Papaconstantinou passed on some of the names to Greek tax prosecutors and to his successor, Evangelos Venizelos, now head of the PASOK party. Nothing was done about the list, however, until a version of it was published by an independent Greek journalist, whom the government then tried, but failed, to prosecute for violating privacy laws. Papaconstantinou is now being investigated for allegedly scrubbing the list of names of his relatives, which he denies doing.]
WM: Over the last few years the Obama administration has pressed German Chancellor Angela Merkel and other European leaders for less severe treatment of Greece and for more growth-oriented policies for Greece and the EU generally. Do you believe that has made a difference, and do you believe that problems with Greece can be solved absent more American engagement and pressure?
AT: The U.S. of course plays a very important role in the global economy, and clearly an important power like Germany should take into account the views and pressures that the U.S. chooses to exercise.
WM: If easing Greece’s debt burden is even possible politically, won’t it have to wait until Merkel gets through the next German elections this fall?
AT: We need to find a sustainable solution that will stabilize Europe. I don’t understand why we have to wait for the general election in Germany to take the next step. We must stop navel gazing and look truth in the eyes. The truth is that our debt is not sustainable. It has gone from 120 percent of GDP to 170 percent of GDP and this is an unfathomable amount.
The money flowing into Greece now is basically going into a bottomless pit. It is flowing toward banks instead of toward helping the Greek economy recover. What we are looking for is a viable solution that would include a further haircut to the debt and a moratorium on payment of the debt, so that we can have the opportunity to start giving back money to our lenders, of course, slowly, gradually, while most importantly helping the Greek economy recover and allowing Greek citizens to live in dignity. Back in 1953, under the London Debt Agreement, America asked European countries, including Greece, to agree to write off 60 percent of Germany’s debts from World War II and to put a moratorium on debt repayments. That was accepted as a solution. What we are asking from Germany is basically the same.